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As filed with the Securities and Exchange Commission on November 8, 1999.
Registration No. 333-87979
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SILICON VALLEY RESEARCH, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
California 7372 94-2743735
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification No.)
</TABLE>
6360 San Ignacio Avenue, San Jose, California 95119-1231, (408)-361-0333
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
James O. Benouis, President and Chief Executive Officer
Silicon Valley Research, Inc.
6360 San Ignacio Avenue, San Jose, California 95119-1231, (408)-361-0333
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than Securities offered only in connection with dividend or
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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==========================================================================================================
Title of Each Class Amount to be Proposed Maximum Proposed Maximum Amount of
of Securities Registered Offering Price Aggregate Offering Registration
to be Registered Per Share Price (1) Fee (1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
==========================================================================================================
</TABLE>
(1) The filing fee of $667.76 has previously been paid.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to such Section 8(a),
may determine.
The exhibit index appears on numbered page II-2.
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SILICON VALLEY RESEARCH, INC.
17,157,159 Shares
Common Stock
PROSPECTUS
Before you invest, please read "Risk Factors" beginning on page 4.
Summary of Capitalization History
- ---------------------------------
The purpose of this prospectus is to describe the offering of 17,157,159 shares
of no par value Common Stock of Silicon Valley Research, Inc. Our shareholders
are offering 5,527,909 outstanding shares, and 11,629,250 shares currently
reserved for fully exercisable warrants.
Selling shareholders of 2,377,909 shares and 2,377,909 warrants purchased the
shares and warrants from us through a private placement offering in reliance on
SEC Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.
We are required by the Unit Purchase Agreement from this offering to file a
registration statement for the shares, as well as the shares exercisable under
the warrants. We are also required to use our best efforts to keep the
registration statement effective until the earlier of:
(i) the date ending three years after the effective date of such
registration statement, or
(ii) the date on which each shareholder is able to sell all of such
holder's registrable securities in any three-month period without
registration under the Securities Act pursuant to Rule 144.
Selling Shareholders of 3,150,000 shares acquired the shares through a merger
between Quality I.C. Corporation and us in March 1998. We are required to
register the shares pursuant to a Registration Rights Agreement entered into in
connection with the merger. The Registration Rights Agreement requires us to
file a registration statement with the SEC. We are also required to use our best
efforts to maintain the effectiveness of the registration statement until the
earlier of:
(i) such time as each holders may sell their Registrable Securities
without registration pursuant to Rule 144 under the Securities Act
within a three-month period, or
(ii) such time as the holders sell all of their Registrable Securities or
(iii) one year after the closing of the Merger.
A Selling Shareholder of 1,251,341 warrants acquired the warrants through a
settlement agreement for the cancellation of a debt. The Warrant Agreement
entered into in connection with the cancellation of debt requires us to file a
registration statement with the SEC covering the warrants. We are also required
to use our best efforts to secure the effectiveness of such registration
statement within ninety (90) days following the date of the Warrant Agreement.
Selling Shareholders of 8,000,000 warrants acquired them through a subordinated
debt/warrant financing which closed on September 24, 1999. The Warrant
Agreement from this financing requires us to file a registration statement under
the Securities Act covering the shares issuable upon exercise of these warrants
and use our best efforts to secure the effectiveness of such registration
statement within ninety (90) days following the date of the warrant.
Selling Shareholders inform us that they intend to sell all of their shares over
time on the OTC Bulletin Board on terms and at prices they determine and
negotiate. Selling Shareholders and any broker-dealers, agents or underwriters
associated with the distribution of any of these shares may be deemed to be
"underwriters" within the meaning of the Securities Act. Any commission
received by them and any profit on the resale of these shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act. See "Plan of Distribution" below.
Silicon Valley Research, Inc. will pay all expenses incident to the offering and
sale to the public of all of the shares mentioned above, except as described in
this Prospectus under the section entitled "Plan of Distribution."
As of the date of this prospectus, the shares have not been registered for sale
under the securities laws of any state or jurisdiction. Brokers or dealers
effecting transactions in the shares should confirm the registration of the
shares under the securities laws of the states in which such transactions occur,
or the existence of any exemptions from such registration.
At present, our common stock is listed on the OTC Bulletin Board. On November 3,
1999, the last sale price of our common stock as reported on the OTC Bulletin
Board was $0.21.
These securities have not been approved or disapproved by the securities and
exchange commission or any state securities commission nor has the securities
and exchange commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
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AVAILABLE INFORMATION
Our common stock trades on the OTC Bulletin Board. Since we comply with
reporting requirements under the Securities Exchange Act of 1934, as amended,
you can obtain copies of all reports, proxy statements, and other information
filed with the SEC. You can inspect or copy any reports, proxy statements and
other information that we file with the SEC. These documents are located at
their public reference room located at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, or at the Regional Offices of the SEC located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048.
For a fee, you can also obtain this material by mail from the Public Reference
Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC
also has a web-site where you can access those forms, which we file
electronically with the SEC. The SEC's web-site is http://www.sec.gov.
We have also filed with the SEC a Form S-3 Registration Statement. Because this
Prospectus does not contain all of the information set forth in the Registration
Statement, you may wish to review this Registration Statement. You may obtain a
copy of this Registration Statement from the Public Reference Section of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, for a fee.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed with the SEC and are incorporated by
reference in this Prospectus:
1. Annual Reports on Form 10-K for the years ended March 31, 1999 and 1998
2. Quarterly Reports on Form 10-Q for the quarters ended June 30, 1998,
September 30, 1998, December 31, 1998 and June 30, 1999
3. Current Report on Form 8-K filed April 10, 1998
4. Current Report on Form 8-K/A filed June 15, 1998
5. Current Report on Form 8-K filed May 21, 1999
6. In-depth description of our Common Stock in the Registration Statement on
Form 8-A filed September 5, 1985.
All documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this Prospectus and prior to the termination of
this offering are incorporated by reference. To the extent that any term or
statement contained in a document, which we are incorporating by reference in
this Prospectus, has been modified or superceded by a subsequent filing or this
Prospectus, the last in time controls.
Although, we cannot provide you with copies of exhibits, if you would like a
copy of any of document listed above in items nos. 1-6, we are happy to send
it/them to you free of charge. You may contact us in writing or by telephone:
Attn: James O. Benouis
Silicon Valley Research, Inc.
6360 San Ignacio Avenue
San Jose, CA 95119-1231
(408) 361-0333
3
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ABOUT US
At Silicon Valley Research, Inc., we develop and market physical design software
for use by integrated circuit designers, including those of our subsidiary,
Quality I.C. Corporation. Our software products are used to automatically and
efficiently arrange and connect the individual components which comprise an
integrated circuit. While this process, commonly referred to as "place and
route", is a crucial element of most chip designs, some critical areas require a
more manual approach. Our designers at Quality I.C. Corporation are skilled in
the production of custom chip components to satisfy demanding performance and
area requirements. By combining both strengths, our design project support and
consulting services encompass nearly all aspects of the physical integrated
circuit design process.
In 1979, Silicon Valley Research, Inc. incorporated in California. Our principal
executive offices are located at 6360 San Ignacio Avenue, San Jose, California
95119-1231. You may reach us by telephone at (408) 361-0333.
RISK FACTORS
The following risk factors should be considered in connection with the other
information included and incorporated by reference in this Prospectus before
purchasing the Common Stock. This Prospectus contains forward-looking statements
that involve risks and uncertainties. Actual results may materially differ from
the projections in the forward-looking statements as a result of risk factors
below and elsewhere in this Prospectus.
Recent and Expected Losses; Accumulated Deficit.
- -----------------------------------------------
For the quarter ended June 30, 1999, we incurred a net loss of approximately
$638,000. We had an accumulated deficit of approximately $44 million as of June
30, 1999. We may incur losses for most of the next fiscal year. We may incur
significant additional losses for a longer period. There is no assurance that we
will generate positive cash flow from operations or that we will attain or
sustain profitability in the future. To the extent we grow or continue to incur
losses, our operating and investing activities may use cash and, consequently,
require us to obtain additional sources of financing in the future or to reduce
operating expenses.
Need for Future Financing. No Assurance of Available Financing.
- ---------------------------------------------------------------
At Silicon Valley Research, Inc., our primary unused sources of funds as of June
30, 1999, consisted of cash and cash equivalents of $418,000. On June 8, 1998,
our $2,000,000 line of credit expired and the $285,000 outstanding under the
line of credit became due and payable. $225,000 of this amount remained
outstanding as of May 11, 1999. In addition, $137,000 outstanding on an
equipment line with the same lender also became due and payable. On May 11,
1999, we entered into a Settlement Agreement with our lender. We agreed to issue
a cash payment for a portion of the debt and to issue warrants to purchase
common stock for cancellation of the remainder. We complied with the terms of
the Settlement Agreement requiring us to make the cash payment and deliver the
warrants to our lender by June 8, 1999.
In June 1999, we began a subordinated debt/warrant financing. The financing
included approximately $1,000,000 of three-year notes and the sale of
approximately 8,000,000 warrants at $0.01 each. The debt bears simple interest
of 10% and the warrants have a five-year term with an exercise price per share
of $0.125. This financing transaction consists of two closings. At the first
closing, which took place on June 7, 1999, we received $768,200 cash proceeds.
The first closing comprised $711,000 of three-year notes and the sale of
approximately 5,700,000 warrants. The second closing was scheduled for July 15,
1999. The second closing was extended until September 24, 1999, pending
negotiation of a workout with the Creditors' Committee through the Credit
Managers' Association to resolve accounts payable issues. An agreement has been
reached that is satisfactory to the majority of the investors. According to the
terms of this agreement, we will receive approximately $311,800 cash proceeds
from the second closing. We have used part of the proceeds from the financing to
complete the Settlement Agreement with our lender and to pay other accounts
payable. We intend to use the balance of the proceeds to help fund our
operations. A Silicon Valley Research, Inc. director/officer, an affiliate of a
Silicon Valley Research, Inc. director and two Silicon Valley Research, Inc. 10%
shareholders participated in this financing. We may require additional financing
prior to year-end.
As of June 30, 1999, our current assets were less than our current liabilities.
However, our cash and cash equivalents were roughly equal to the cash required
to fund our current liabilities since a substantial amount of the accrued
liabilities and deferred revenue do not require cash to fund them at present.
Because an agreement was reached with the Creditors' Committee through the
Credit Manager's Association, we will receive approximately
4
<PAGE>
$311,800 in cash and a reduction and/or postponement in a portion of our current
payables. Our operations have required substantial cash in the past; for example
$469,000 during the fiscal 2000 first quarter; however, management has
implemented cost reducing measures and expects revenues to increase during the
remainder of fiscal 2000.
Assuming management is successful with their cost reduction and revenue
achievement programs, we expect to fund future operations without requiring
additional financing. However, it is possible that we could require additional
financing to fund future operations.
We may issue a series of Preferred Stock with rights, preferences, or privileges
senior to those of the Common Stock. We have no commitments or arrangements to
obtain any additional funding and there is no assurance that the amount of
capital required will be available on acceptable terms, if at all. However,
because our Common Stock was delisted from trading on the NASDAQ national market
in November, 1998, and now trades in the over-the-counter market, our ability to
sell Common Stock or securities convertible into Common Stock may be adversely
affected. See "Delisting From NASDAQ; Disclosure Relating to Low-Priced Stock"
below for possible effect of current common stock trading on future issuances.
The unavailability or timing of any financing could prevent or delay our
continued development and marketing of our products and services. In addition,
substantial curtailment of our operations may be required which could result in
bankruptcy. We are currently negotiating terms and timing of repayment amounts
with creditors.
Going Concern Assumptions.
- -------------------------
Our independent accountants' report on our consolidated financial statements as
of and for the years ended March 31, 1997, 1998 and 1999 contain an explanatory
paragraph indicating that our historical operating losses and limited capital
resources raise substantial doubt about our ability to continue as a going
concern. We may require substantial additional funds in the near future. If we
are unable to raise sufficient funds or generate sufficient cash from operations
to cover the cost of our operations, it is likely that any independent
accountant's report on our future financial statements will include a similar
explanatory paragraph.
New Products and Rapid Technological Change; Risk of Product Defects.
- --------------------------------------------------------------------
The Electronic Design Automation ("EDA") industry is characterized by the
following:
- - extremely rapid technological change
- - frequent new product introductions and enhancements
- - evolving industry standards
- - rapidly changing customer requirements.
The development of more complex integrated circuits with new technologies will
require more sophisticated design tools. The success of our future operations
partly depends upon our ability to enhance our current products and to develop
and introduce new products on a timely and cost-effective basis. Our products
and services must keep pace with technological developments and evolving
industry standards and methodologies, as well as address the increasingly
sophisticated needs of our customers. It is possible that in the future, we may
experience delays in new product development and product enhancements. We have
experienced similar delays in the past.
We announced a new product named DCP (Design Cockpit Platform). However, there
is no guarantee that:
- - this new product will gain market acceptance
- - we will be successful in developing and marketing product enhancements
- - we will be successful in developing other new products that respond to
technological change, evolving industry standards and changing customer
requirements
- - we will not experience difficulties that could delay or prevent the
successful development introduction and marketing of these products or
product enhancements
- - our new products and product enhancements will adequately meet the
requirements of the marketplace and achieve any significant degree of market
acceptance
All of our present products operate in the Unix operating system and we intend
for all of our future products to operate in the Unix operating system as well
as the Linux operating system. In the event that another operating
5
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system, such as Windows NT, were to achieve broad acceptance in the EDA
industry, we would be required to port our products. This would be costly and
time consuming and could have a material adverse effect on our business,
operating results or financial condition. If we fail to develop and introduce
new products and product enhancements in a timely and cost-effective manner, for
technological or other reasons, it could also have material and adverse effects
on our business, operating results and financial condition. Introducing or even
announcing new products by us or our competitors, including new technologies or
changes in industry standards or customer requirements, could render some or all
of our existing products obsolete or unmarketable. Furthermore, customers might
defer purchases due to the introduction or announcement, which would also have a
material adverse effect on our business, operating results or financial
condition.
Complex software products, such as those we offer, can contain defects or even
fail when introduced or released. We have, in the past, discovered defects in
certain of our products. We may experience delays or lost revenue in connection
with repairs and corrections of defects we find in the future. Although to date
we have not experienced material adverse effects resulting from defects, it is
possible in the future that despite testing, errors will go undiscovered in new
products or releases until after shipment. These errors may result in loss of
market share or failure to achieve market acceptance. If this were to occur, it
could have a material adverse effect upon our business, operating results or
financial condition.
Delisting From NASDAQ; Disclosure Relating to Low-Priced Stock.
- --------------------------------------------------------------
Our common stock was delisted from trading on the NASDAQ National Market
November 16, 1998. Our common stock immediately began trading on the OTC
Bulletin Board. As a result, our ability to obtain additional financing through
the issuance of common stock or securities convertible into common stock may be
adversely affected. You might find that disposing of our common stock is more
difficult than is has been in the past. The trading price of our common stock is
currently less than $5.00 per share. Because of our common stock falls into the
category defined as penny stock, trading in the common stock is currently
subject to certain rules promulgated under the Exchange Act, which require
additional disclosure by broker-dealers. These rules require us, in advance of
trading, to provide you with disclosure schedules, which explain the penny stock
market and associated risks. The rules impose various sales practice
requirements on broker-dealers who sell penny stock. Broker-dealers engaging in
some types of these transactions must make a special suitability determination
and obtain your written consent prior to sale. This additional burden may
discourage broker-dealers from actively effectuating common stock transactions,
which in turn could have the adverse effect of severely limiting the
marketability of our common stock. Therefore, the ability of Silicon Valley
Research, Inc. shareholders to resell their stock would be limited. In turn,
this could adversely effect our ability to obtain future equity financing.
Possible Volatility of Stock Price.
- ----------------------------------
The market price of our common stock has been volatile. The following events
could cause the market price of our common stock to fluctuate substantially:
- - future announcements concerning our competitor's or our quarterly variations
in operating results
- - the introduction of technological innovations, new products, or changes in
product pricing policies
- - proprietary rights or other litigation, or
- - changes in earnings estimates by analysts or other factors
The stock market has from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices for the common
stocks of technology companies like us. These fluctuations have often been
unrelated to the operating performance of particular companies.
In the past, shareholder class action suits have been filed against companies
following periods of volatility of stock price. Litigation of this nature could
occur in our future. Litigation often diverts management attention and resources
and is costly to the company. If we were placed in this position, it could have
a material adverse effect on our business, financial condition and operation
results. Significant liabilities are always possible effects of litigation.
Potential Fluctuations in Quarterly Operating Results.
- -----------------------------------------------------
Numerous factors may materially and unpredictably affect our operating results,
including:
- - uncertainties of the size and timing of software license fees
- - timing of co-development projects with customers
- - timing of operating expenditures
- - increased competition
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- - new product announcements and releases by us and our competitors
- - gain or loss of significant customers or distributors
- - expense levels
- - renewal of maintenance contracts
- - pricing changes by us or our competitors
- - personnel changes
- - foreign currency exchange rates
- - economic conditions generally and in the electronics industry specifically
Any unfavorable change in these or other factors could have a material adverse
effect on our operating results for a particular quarter. Many of our customers
order on an as-needed basis and often delay delivery of firm purchase orders
until their project commencement dates are determined. As a result, we operate
with no significant backlog. Therefore, quarterly revenue and operating results
will depend on the volume and timing of orders received during the quarter,
which are difficult to forecast accurately. Historically, we have often
recognized a substantial portion of our license revenues in the last month of
the quarter, with these revenues frequently concentrated in the last two weeks
of the quarter. Our operating results would be disproportionately affected by a
reduction in revenue because only a small portion of expenses vary with revenue.
Operating results in any period should not be considered indicative of the
results to be expected for any future period. Our revenues may or may not
increase and we may or may not become profitable.
Lengthy Sales Cycle.
- -------------------
The licensing and sale of our software products generally involve a significant
commitment of capital from prospective customers. Delays are frequently
associated with large capital expenditures and lengthy acceptance procedures.
For these and other reasons, the sales cycle associated with the licensing of
our products is typically lengthy and subject to a number of significant risks
over which we have little or no control. Because the timing of customer orders
is hard to predict, we believe that our quarterly operating results are likely
to vary significantly in the future. Our actual results could vary materially as
a result of a variety of factors, including, without limitation:
- - the high average selling price and long sales cycle for our products
- - the relatively small number of orders per quarter
- - dependence on sales to a limited number of large customers
- - timing of receipt of orders
- - successful product introduction
- - acceptance of our products and increased competition
Dependence Upon Semiconductor and Electronics Industries; General Economic and
- ------------------------------------------------------------------------------
Market Conditions.
- -----------------
At Silicon Valley Research, Inc., we are dependent upon the semiconductor and,
more generally, the electronics industries. Each of these industries is
characterized by rapid technological change, short product life cycles,
fluctuations in manufacturing capacity and pricing. Each of these industries is
highly volatile and has periodically experienced significant downturns. Often in
connection with, or in anticipation of, declines in general economic conditions,
the number of new integrated circuit design projects often decreases. Our
customers' purchases of new licenses from us are largely dependent upon the
commencement of new design projects. Factors negatively affecting any of these
industries could have a material adverse effect on our business, operating
results or financial condition. Our business, operating results and financial
condition may in the future reflect substantial fluctuations from period to
period due to patterns and general economic conditions in either the
semiconductor or electronics industry.
International Sales.
- -------------------
International sales, primarily in Japan and Taiwan, accounted for approximately
25% of the total revenue in fiscal 1997, 32% in 1998, 36% in 1999 and 2% and the
first three months of 2000. Declining revenues from international sales were a
result of the reduction in capital expenditures by semiconductor manufacturers,
particularly in Asia, as a result of the current financial crisis in that
region, and increased competition in the EDA software market. We expect that
international sales will continue to account for a significant portion of our
revenue. We plan to continue to expand our international sales and distribution
channels. However, this revenue involves a number of inherent risks, including:
- - economic downturn in the electronics industry in Asia
- - traditionally slower adoption of the our products internationally
- - general strikes or other disruptions in working conditions
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- - generally longer receivables collection periods
- - unexpected changes in or impositions of legislative or regulatory
requirements
- - reduced protection for intellectual property rights in some countries
- - potentially adverse taxes
- - delays resulting from difficulty in obtaining export licenses for certain
technology
- - other trade barriers
The factors listed above may have a material adverse effect on our future
international sales and, consequently, on our operating results.
Effective December 1998, we discontinued operating our Tokyo office and in March
1999, we discontinued operating our Taiwan office. In the future, we will use
distributors to service the Japanese and Taiwanese markets.
Competition.
- -----------
The EDA software market in which Silicon Valley Research, Inc. competes is
intensely competitive and subject to rapid technological change. We currently
face competition from EDA vendors, including Cadence, which currently holds the
dominant share of the market for integrated circuit physical design software,
Avant! and Synopsys. These EDA vendors have significantly greater financial,
technical and marketing resources, greater name recognition and a larger
installed customer base than we do. These companies also have established
relationships with current and potential customers of ours and can devote
substantial resources aimed at preventing us from enhancing relationships with
existing customers or establishing relationships with potential customers. We
believe that competitive factors in the EDA software market include:
- - product performance
- - price
- - support of industry standards
- - ease of use
- - delivery schedule
- - product enhancement
- - customer technical support and service
Competition from other EDA companies that choose to enter the integrated circuit
physical design market could present particularly formidable competition due to
their large installed customer base and their ability to offer a complete
integrated circuit design solution. We expect additional competition from other
established and emerging companies. In addition, the EDA industry has become
increasingly concentrated in recent years as a result of consolidations,
acquisitions and strategic alliances. Accordingly, it is possible that new
competitors or alliances among competitors could emerge and rapidly acquire
significant market share. We cannot assure you that we will be able to compete
successfully against current and future competitors or that competitive
pressures faced by us will not have a material adverse effect on our business,
operating results and financial condition.
Dependence on Certain Customers and Resellers.
- ---------------------------------------------
A small number of customers account for a significant percentage of our total
revenue.
PERCENTAGE OF OUR TOTAL REVENUE BY CUSTOMER
<TABLE>
<CAPTION>
CUSTOMER FISCAL 1997 FISCAL 1998 FISCAL 1999
-------- ----------- ----------- -----------
<S> <C> <C> <C>
HAL Computer Systems, Inc., a subsidiary of Fujitsu Ltd. 14% N/A N/A
Lucent Technologies 19% N/A N/A
Motorola, Inc. 13% 13% 18%
Aspec Technology N/A 20% N/A
</TABLE>
We cannot assure you that sales to these entities, individually or as a group,
will reach or exceed historical levels in any future period. Any substantial
decrease in sales to one or more of these customers could have a material
adverse effect on our business, operating results or financial condition. We
currently sell and market our products overseas
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through a limited number of distributors. Our history of performance with our
distributors is also limited. We cannot offer you assurance that the new
distributors will be able to successfully distribute and support our products on
a timely basis or that such distributors will not reduce their efforts devoted
to selling our products or terminate the relationship as a result of competition
with other suppliers' products. The loss of, or changes in, the relationship
with, or performance by, one or more of our international distributors could
have an adverse effect on our business.
Management Transition.
- ---------------------
Here at Silicon Valley Research, Inc., we are experiencing a period of
management transition that has placed, and may continue to place, a significant
strain on our resources, including our personnel. James O. Benouis joined the
Company in March 1998 as our President and Chief Operating Officer. On August 4,
1998, Mr. Benouis was appointed our Chief Executive Officer. Effective April 2,
1999, Laurence G. Colegate, Jr. resigned as Chief Financial Officer.
Our ability to manage growth successfully will require our management personnel
to work together effectively and will require us to improve our operational,
management and financial systems and controls. If our management is unable to
bring about this transition effectively, our business, competitive position,
results of operations and financial condition will be materially and adversely
affected. See "Dependence on Key Personnel" below.
Dependence on Key Personnel.
- ---------------------------
Our success depends to a significant extent upon a number of key technical and
management employees, in particular, Robert R. Anderson, Chairman, and James O.
Benouis, President and Chief Executive Officer. We do not currently have "key
man" life insurance on Mr. Anderson or Mr. Benouis. The loss of services of Mr.
Anderson or Mr. Benouis or any of our other key employees could have a material
adverse effect on us. See "Management Transition" above.
Also, our success depends in large part on our ability to attract and retain
highly skilled technical, managerial, sales and marketing personnel. Competition
for such talented personnel is intense. We cannot assure you that we will be
successful in retaining our key technical and management personnel or in
attracting and retaining the personnel we require now in order to grow.
Legal Proceedings.
- -----------------
As with other companies in industries similar to our own, we are subject to the
risk of adverse claims and litigation on a variety of matters, including
infringement of intellectual property, intentional and/or negligent
misrepresentation of material facts and breach of fiduciary duties. Due to our
present cash shortage and resulting inability to pay our vendors, several of our
vendors have initiated collection actions against us. Through the Credit
Managers' Association, we have settled with 95% of our creditors for a complete
release of claim or an agreement to stay collection activities for one year.
Proprietary Rights.
- ------------------
Silicon Valley Research, Inc. relies on contract, trade secret and copyright law
to protect its technology. Competitors may develop similar or superior
technologies or duplicate our technology. We generally enter into
confidentiality or license agreements with our employees, distributors and
customers, and limit access to and distribution of our software, documentation
and other proprietary information. Despite these precautions, it is possible for
a third party to copy or otherwise obtain and use our products or technology
without authorization, or to develop similar technology independently. In
addition, effective copyright and trade protection may be unavailable or limited
in certain foreign countries.
There has been substantial industry litigation regarding patents and other
intellectual property rights involving technology companies. In the future,
litigation may be necessary to protect and enforce our intellectual property
rights, to defend us against claimed infringement of the rights of others and to
determine the scope and validity of the proprietary rights of others. Any such
litigation could be costly and could divert management's attention, which could
have a material adverse effect on our business, results of operations or
financial condition regardless of the outcome of the litigation. In addition,
third parties making claims against us with respect to intellectual property
infringement may block our ability to sell products in the United States and
abroad, and could result in an award of substantial damages. In the event of a
claim of infringement, Silicon Valley Research, Inc. and our customers could be
required to obtain one or more licenses from third parties. We cannot assure you
that either our customers or we could obtain necessary licenses from third
parties at a reasonable cost or at all.
9
<PAGE>
Concentration of Stock Ownership.
- --------------------------------
Our present directors, executive officers and 5% shareholders and their
affiliates beneficially own approximately 77% of the outstanding common stock as
of September 24, 1999. As a result, these shareholders may be able to exercise
significant influence over all matters requiring shareholder approval, including
the election of directors and approval of significant corporate transactions.
Such concentration of ownership may have the effect of delaying or preventing a
change in control of Silicon Valley Research, Inc.
Depressive Effect of Warrants.
- -----------------------------
We have a substantial number of common stock warrants outstanding with an
exercise price of $0.125 (9,251,341) and of $0.37 (2,400,000). These warrants
may have the effect of causing our stock price to be lower than it would be
otherwise.
Effect of Certain Charter Projections; Blank Check Preferred Stock.
- ------------------------------------------------------------------
Our Board of Directors has the authority to issue up to 1,000,000 shares of
preferred stock and to determine the price, rights, preferences, privileges and
restrictions, including voting rights, without any further vote or action by
shareholders. The rights of the holders of the common stock will be subject to,
and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of our outstanding voting stock.
Shares Eligible for Future Sale.
- -------------------------------
Sales of a substantial number of shares of common stock in the public market
following this offering could adversely affect the market price for our common
stock. On the date of this Prospectus, 26,221,220 shares, including 5,527,909 of
the 17,157,159 shares offered hereby, are eligible for sale, subject in some
cases to the volume and other restrictions of Rule 144 under the Securities Act.
An additional 11,629,250 shares of common stock issuable upon exercise of the
warrants are eligible for sale. An additional 8,602,550 shares of common stock
issuable upon exercise of outstanding warrants, other than the warrants already
listed, are eligible for sale, subject in some cases to the volume and other
restrictions under Rule 144. If existing shareholders, or future shareholders
resulting from exercise of existing warrants, cause a large number of shares to
be sold in the public market, such sales could have a material adverse effect on
the market price of our common stock.
Inflation.
- ---------
To date, inflation has not had a significant impact on the results of our
operations.
Recent Accounting Pronouncements.
- --------------------------------
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." Statement of Position 98-1 provides
guidance for determining whether computer software is internal-use software and
on capitalization of the costs associated with internal-use computer software.
It also provides guidance on accounting for the proceeds of computer software
originally developed or obtained for internal use and then subsequently sold to
the public. We have not yet determined the impact, if any, of adopting this
statement. The disclosures prescribed by Statement of Position 98-1 will be
effective for the year ending March 31, 2000 consolidated financial statements.
Year 2000 Issue.
- ---------------
Year 2000 issue arises because most computer systems and programs were designed
to handle only a two-digit year, as opposed to a four-digit year. When the year
2000 begins, these computers may interpret "00" as the year 1900 and could
either stop processing date-related computations or could process them
incorrectly. As our customers and potential customers devote resources to this
issue, resources previously allocated to other information systems requirements
may be redirected to address Y2K problems and issues. To the extent that our
products are not selected as part of customers' overall Y2K solution,
redirection of these customer resources could have a material adverse effect on
our results of operations and financial condition. In addition, the Y2K Issue
creates risk for us from unforeseen problems in our internal computer systems
and from interaction with third parties. Failure on our part, or on the part of
third parties' computer systems could have a material impact on our ability to
conduct our business and to process and account for the transfer of funds
electronically.
10
<PAGE>
MATERIAL CHANGES
Subordinated Debt Financing.
- ---------------------------
In June 1999, the Company began a subordinated debt/warrant financing. The
financing included approximately $1,000,000 of three-year notes and the sale of
approximately 8,000,000 Warrants at $0.01 per Warrant. The debt bears simple
interest of 10% and the Warrants have a five-year term with an exercise price
per share of $0.125. This financing transaction consists of two closings. The
first closing took place on June 7, 1999. The Company received $768,200 cash
proceeds from this closing. This included $711,000 of three-year notes and the
sale of approximately 5,700,000 Warrants at $0.01 per Warrant. The second
closing was to have taken place on July 15, 1999. The closing was extended
until September 24, 1999 pending negotiation of a workout with the Creditors'
Committee through the CMA to resolve accounts payable issues that was
satisfactory to the majority of the investors. An agreement has been reached
and the Company will receive approximately $311,800 cash proceeds from the
second closing. The Company has used part of the proceeds from the financing to
complete the Settlement Agreement with its lender and to pay other accounts
payable and intends to use the balance of the proceeds to help fund its
operations. Two Company director/officers, an affiliate of a Company director
and two Company 10% shareholders participated in the financing.
MANAGEMENT
As of September 24, 1999, the names of the directors and executive officers
of the Company and their respective ages are as follows:
Name Age Position with the Company
---- --- -------------------------
Robert R. Anderson 61 Chairman of the Board
James O. Benouis 31 President, Chief Executive Officer
and Director
David G. Arscott 55 Director
David Knight 51 Director
Robert R. Anderson became Chairman of SVR in January 1994 and re-assumed
the position of Chief Executive Officer in December 1996 until August 1998.
Prior to that, Mr. Anderson was Chief Executive Officer from April 1994 until
July 1995 and was Chief Financial Officer from September 1994 to November 1995.
Mr. Anderson co-founded KLA Instruments Corporation "KLA," a supplier of
equipment for semiconductor companies, in 1975. He served as Vice-Chairman of
the Board of KLA from November 1991 to March 1994 and served as Chairman of the
Board of KLA from May 1985 to November 1991. Prior to that, Mr. Anderson served
as Chief Operating Officer and Chief Financial Officer of KLA for nine years.
Mr. Anderson currently serves as a director of Applied Science & Technology
Inc., a supplier of systems components for the semiconductor industry.
James O. Benouis became President and Chief Operating Officer of the
Company in March 1998 and was appointed Chief Executive Officer in August 1998.
Mr. Benouis came to the Company from Quality I.C. Corporation ("QIC"), an
integrated circuit design services company based in Austin, Texas, which was
acquired by the Company in March 1998, where he was President from 1995 to 1998.
While at QIC, his roles included project leadership for all IC design projects,
software enhancements and daily business operation management. He holds a
degree in Electrical Engineering from the University of Texas.
David G. Arscott is General Partner and Co-Founder of Compass Technology
Partners which invests in public and private technology companies. He began his
career with Citicorp Venture Capital Limited and in 1973 opened its West Coast
office. In 1978, Mr. Arscott co-founded Arscott Norton & Associates, which
formed three venture capital funds. He is a director and past Chairman of Lam
Research Corporation and a director of Cyberstate University. He has formerly
served as President and Director of the Western Association of Venture
Capitalists. Mr. Arscott earned his B.A. degree from the College of Wooster
(1966) and his MBA from the University of Michigan.
David Knight is the Founder, Chairman and CEO of The Shearwater Group,
Inc., a worldwide EDA software distribution and support company founded in 1992
which provides software tools and turnkey hardware/software solutions for
Integrated Circuit ("IC") design. Prior to working at Shearwater, he co-founded
Ultratech Photomask and was Division President of Sierracin/EOI. Mr. Knight has
over thirty years experience in the IC design and manufacturing industry.
11
<PAGE>
SELLING SHAREHOLDERS
The following table lists the Selling Shareholders, the number of shares of the
Company's Common Stock which each beneficially owned as of September 24, 1999,
the number of Shares expected to be sold by each, and the number and the
percentage of the shares of the Company's Common Stock each will beneficially
own after the offering pursuant to the Registration Statement, assuming the sale
of all the Shares expected to be sold. The percentage is based upon the number
of shares of the Company's Common Stock outstanding on September 24, 1999 of
26,221,220.
The Selling Shareholders of 2,377,909 shares of Common Stock and 2,377,909
shares issuable pursuant to the exercise of warrants acquired such shares
pursuant to a Unit Purchase Agreement ("the Agreement") between the Company and
such Selling Shareholders in a private placement by the Company in reliance on
Regulation D and/or Section 4(2) of the Securities Act. The $0.37 exercise price
for the warrants is payable in cash, cancellation of indebtedness, in shares of
the Company's Common Stock, through a "same day sale" commitment or "margin"
commitment from the warrant holder and a broker who is a member of the National
Association of Securities Dealers, Inc. (the "NASD") or by a "net exercise." The
warrants are exercisable for a term of seven years. The Company agreed to file a
registration statement under the Securities Act with respect to the shares
issued or issuable pursuant to the Agreement and to cause the registration
statement to remain effective until the earlier of (a) the date ending three
years after the effective date of the registration statement, or (b) the date on
which the holder of registrable securities is able to sell all of such holder's
registrable securities in any single three month period without registration
under the Securities Act pursuant to Rule 144. The Selling Shareholders of
3,150,000 shares acquired the shares through a merger of Silicon Valley
Research, Inc. and Quality I.C. Corporation in March 1998. The Agreement and
Plan of Reorganization entered into in connection with the merger requires that
the shares be registered pursuant to a Registration Rights Agreement. The
Registration Rights Agreement requires the Company to file a registration
statement under the Securities Act and use its best efforts to maintain the
effectiveness of the registration statement until the earlier of (A) such time
as each of the Holders may sell all of the Registrable Securities held by him,
her or it without registration pursuant to Rule 144 under the Securities Act
within a three-month period, (B) such time as all of the Registrable Securities
have been sold by the Holders or (C) one year after the closing of the Merger.
The Selling Shareholder of 1,251,341 warrants acquired the warrants through a
settlement agreement for the cancellation of debts at annual interest rates of
8.75% and 11.75%, which matured on June 8, 1998. The $0.125 exercise price for
the warrants is payable in cash, cancellation of indebtedness, in shares of the
Company's Common Stock, through a "same day sale" commitment or "margin"
commitment from the warrant holder and a broker who is a member of the NASD or
by a "net exercise." The warrants are exercisable for a term of seven years. The
Warrant Agreement entered into in connection with the cancellation of debts
requires the Company to file a registration statement under the Securities Act
covering the Warrants and use its best efforts to secure the effectiveness of
such registration statement within ninety (90) days following the date of the
Warrant Agreement. The Selling Shareholders of 8,000,000 Warrants acquired the
Warrants through a subordinated debt/warrant financing closed by the Company on
September 24, 1999. The Warrants are exercisable for a term of five years. The
$0.125 exercise price is payable in cash, cancellation of indebtedness, in
shares of the Company's Common Stock, through a "same day sale" commitment or
"margin" commitment from the warrant holder and a broker who is a member of the
National Association of Securities Dealers, Inc. (the "NASD") or by a "net
exercise." The Warrant agreement entered into in connection with the financing
requires the Company to file a registration statement under the Securities Act
covering the shares issuable upon exercise of the Warrants and use its best
efforts to secure the effectiveness of such registration statement within ninety
(90) days following the date of the Warrant.
<TABLE>
<CAPTION>
Shares Percentage of
Shares Owned Shares To Owned After Company's
Selling Shareholder Before Offering Be Offered Offering Common Stock
- ------------------- --------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
Robert R. Anderson 2,599,554 (3) 828,838 (19) 1,770,716 6.6
Bay Area Micro-Cap Fund, L.P. 4,155,630 (4) 1,977,674 (20) 2,177,956 8.0
Bay Partners SBIC, L.P. 1,191,584 (5) 348,838 (21) 842,746 3.2
James O. Benouis 2,252,421 (6) 2,135,755 (22) 116,666 *
Clarion Capital Corporation 1,241,078 (7) 659,225 (23) 581,853 2.2
Compass Chicago Partners, L.P. (1) 878,842 (8) 642,206 (24) 236,636 *
Compass Management Partners, L.P. (1) 113,150 (9) 59,036 (25) 54,114 *
Compass Technology Partners, L.P. (1) 1,759,323 (10) 758,484 (26) 1,000,839 3.8
Imperial Bank 1,266,341 (11) 1,251,341 (11) 15,000 *
Isabella Partners 650,167 (12) 316,280 (27) 333,887 1.3
J. F. Shea Co., Inc., 9,547,687 (13) 4,384,186 (28) 5,163,501 18.2
Peninsula Fund, L.P. 944,208 (14) 719,208 (29) 225,000 *
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Shares Percentage of
Shares Owned Shares To Owned After Company's
Selling Shareholder Before Offering Be Offered Offering Common Stock
- ------------------- --------------- ---------- ----------- -------------
<S> <C> <C> <C> <C>
David R. Reebel 1,384,615 1,384,615 0 *
Rogers Family Trust 1,964,057 (15) 716,280 (30) 1,247,777 4.7
Special Situations Cayman 1,434,042 (16) 162,790 (21) 1,271,252 4.8
Fund, L.P. (2)
Special Situations Private 2,663,568 (17) 162,790 (21) 2,500,778 9.1
Equity Fund, L.P. (2)
William R. Timken 885,476 (18) 649,613 (31) 235,863 *
</TABLE>
- ---------------
* Less than 1%
(1) David Arscott is a General Partner of Compass Chicago Fund, L.P., Compass
Management Fund, L.P. and Compass Technology Fund, L.P. The three limited
partnerships beneficially owned 9.9% of the Company's outstanding shares as
of September 24, 1999. Mr. Arscott disclaims beneficial ownership of the
portion of the shares that exceeds his proportionate interest in the
partnerships.
(2) Austin Marxe is a General Partner of Special Situations Private Equity
Fund, L.P. and Special Situations Cayman Fund, L.P. He beneficially owned
26.6% of the Company's outstanding shares as of September 24, 1999.
(3) Includes 680,956 shares held in trust of which Mr. Anderson is trustee,
including 610,956 shares held by the Robert R. and Sally E. Anderson Trust,
12,500 shares held by the Robert K. Anderson Trust, 12,500 shares held by
the Sharon Davidson Trust, 35,000 shares held by the Timothy R. Anderson
Trust and 10,000 shares held by the Steven Davidson Trust. Also includes
17,550 shares of which Mr. Anderson disclaims beneficial ownership,
including 2,550 shares owned by Sharon Davidson and 15,000 shares owned by
Steven Davidson, two of Mr. Anderson's children. Also includes 561,775
shares, 1,151,775 shares subject to warrants exercisable within 60 days of
September 24, 1999 and 187,498 shares subject to options exercisable within
60 days of September 24, 1999 held directly by Mr. Anderson. Mr. Anderson
is Chairman of the Board of the Company and beneficially owned 9.4% of the
Company's outstanding shares as of September 24, 1999.
(4) Includes 1,628,165 shares and 2,473,665 shares subject to warrants
exercisable within 60 days of September 24, 1999 held by Bay Area Micro-Cap
Fund, L.P. (of which Gregory F. Wilbur is a General Partner). Also includes
53,800 shares held directly by Gregory F. Wilbur. Bay Area Micro-Cap Fund,
L.P. beneficially owned 14.5% of the Company's outstanding shares as of
September 24, 1999.
(5) Includes 505,833 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(6) Includes 370,370 shares subject to warrants and 116,666 shares subject to
options exercisable within 60 days of September 24, 1999.
(7) Includes 792,889 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(8) Includes 651,634 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(9) Includes 78,230 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(10) Includes 958,088 shares subject to warrants exercisable within 60 days of
September 24, 1999. Also includes 24,098 shares held directly by David
Arscott, General Partner of Compass Technology Partners.
(11) These Shares are issuable upon exercise of warrants.
(12) Includes 382,611 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(13) Includes 3,460,395 shares held by J.F. Shea Co., Inc., 472,258 shares held
by E&M RP Trust (of which Edmund H. Shea, Jr. is a Trustee), 7,258 shares
held directly by John H. Shea and 7,258 shares held directly by Peter O.
Shea. Edmund H. Shea, Jr., John H. Shea and Peter O. Shea are executive
officers of J.F. Shea Co., Inc. Also includes 5,600,518 shares subject to
warrants held by J.F. Shea Co., Inc. exercisable within 60 days of
September 24, 1999. J.F. Shea Co., Inc. beneficially owned 30% of the
Company's outstanding shares as of September 24, 1999.
(14) Includes 544,789 shares subject to warrants exercisable within 60 days of
September 24, 1999.
13
<PAGE>
(15) Includes 878,714 shares and 1,024,554 shares subject to warrants
exercisable within 60 days of September 24, 1999 held by the Rogers Family
Trust (of which Roy L. Rogers is a Trustee). Also includes 15,000 shares
held by the Roy L. Rogers IRA. Also includes 45,789 shares and 10,000
shares subject to options exercisable within 60 days of September 24, 1999
held directly by Mr. Rogers. Mr. Rogers beneficially owned 7.2% of the
Company's outstanding shares as of September 24, 1999.
(16) Includes 578,521 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(17) Includes 1,331,784 shares subject to warrants exercisable within 60 days
of September 24, 1999.
(18) Includes 690,944 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(19) Includes 654,419 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(20) Includes 1,628,837 shares subject to warrants exercisable within 60 days
of September 24, 1999.
(21) Exactly half of these Shares are issuable upon exercise of warrants.
(22) Includes 370,370 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(23) Includes 542,946 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(24) Includes 584,066 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(25) Includes 53,222 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(26) Includes 642,205 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(27) Includes 258,140 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(28) Includes 3,512,093 shares subject to warrants exercisable within 60 days
of September 24, 1999.
(29) Includes 544,789 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(30) Includes 658,140 shares subject to warrants exercisable within 60 days of
September 24, 1999.
(31) Includes 591,473 shares subject to warrants exercisable within 60 days of
September 24, 1999.
14
<PAGE>
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Shareholders that they, or their
respective pledgees, donees, transferees or successors in interest, intend to
sell all of the Shares from time to time on the OTC Bulletin Board at prices and
at terms prevailing at the time of sale or at prices related to the then current
market price or in negotiated transactions. The Shares may be sold by one or
more of the following methods: (a) an over-the-counter distribution in
accordance with the rules of the OTC Bulletin Board and at prices prevailing at
the time of sale; (b) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (c) in privately negotiated transactions.
There is no assurance that the Selling Shareholders will sell any or all of the
Shares.
In effecting sales, brokers or dealers engaged by the Selling Shareholders may
arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from the Selling Shareholder in amounts to be
negotiated prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales.
With respect to shares offered by the Selling Shareholders, the Company will pay
all expenses incurred in connection with any registration qualification and
compliance requested pursuant to the Agreements (excluding underwriters' or
brokers' discount and commissions), including without limitation all filing
registration and qualification, printers' and accounting fees and the reasonable
fees and disbursements of one counsel for the Selling Shareholders and counsel
for the Company.
The Company has agreed to indemnify in certain circumstances the Selling
Shareholders and various related persons against certain liabilities, including
liabilities under the Securities Act. The Selling Shareholders have agreed to
indemnify in certain circumstances the Company and various related persons
against certain liabilities, including liabilities under the Securities Act.
Pursuant to the Unit Purchase Agreement, the Company agreed to use its best
efforts to cause the Registration Statement, of which this Prospectus
constitutes a part, to remain effective until the earlier of (a) the date ending
three years after the effective date of the Registration Statement, or (b) the
date on which a selling shareholder is able to sell all of such Holder's
registrable securities in any single three-month period without registration
under the Securities Act pursuant to Rule 144. Pursuant to the Registration
Rights Agreement, the Company agreed to use its best efforts to maintain the
effectiveness of the registration statement until the earlier of (A) such time
as each of the Holders may sell all of the Registrable Securities held by him,
her or it without registration pursuant to Rule 144 under the Securities Act
within a three-month period, (B) such time as all of the Registrable Securities
have been sold by the Holders or (C) one year after the closing of the Merger.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Shareholders. The Company could receive up to $2,036,244 upon the cash
exercise of all the Warrants, of which there can be no assurance. The exercise
price for the Warrants is payable in cash, cancellation of indebtedness, in
shares of the Company's Common Stock, through a "same day sale" commitment or
"margin" commitment from the warrant holder and a broker who is a member of the
NASD or by a "net exercise". See "Selling Shareholders". The Company intends to
use any proceeds received from the exercise of Warrants for general corporate
purposes, including working capital.
LEGAL MATTERS
The legality of the Shares is being passed upon by Rosenblum, Parish &
Isaacs, P.C.
EXPERTS
The consolidated financial statements as of March 31, 1999 have been so
incorporated in reliance on the report (which contains an explanatory paragraph
relating to the Company's ability to continue as a going concern as described in
Note 1 to the consolidated financial statements) of Moss Adams LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting. See "Incorporation of Certain Documents by Reference."
The consolidated financial statements as of March 31, 1998 and for each of the
two years then ended incorporated in this Prospectus by reference to the Annual
Report on Form 10-K for the year ended March 31, 1999 have been so incorporated
in reliance on the report (which contains an explanatory paragraph relating to
the Company's ability to continue as a going concern as described in Note 1 to
the consolidated financial statements) of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
15
<PAGE>
================================================================================
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained or incorporated by
reference in this Prospectus in connection with the offering described herein,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or by any Underwriter. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, any securities other than the registered securities to which it relates,
or an offer to sell, or a solicitation of an offer to buy, in any jurisdiction
in which it is unlawful to make such offer or solicitation. Neither the delivery
of this Prospectus nor any sale made hereunder shall, under any circumstances,
create an implication that there has been no change in the affairs of the
Company since the date hereof or that the information contained herein is
correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
----
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
The Company............................................................... 4
Risk Factors.............................................................. 4
Material Changes.......................................................... 11
Management................................................................ 11
Selling Shareholders...................................................... 12
Plan of Distribution...................................................... 15
Use of Proceeds........................................................... 15
Legal Matters............................................................. 15
Experts................................................................... 15
================================================================================
================================================================================
17,157,159 Shares
SILICON VALLEY
RESEARCH, INC.
COMMON STOCK
--------------------
PROSPECTUS
--------------------
November ___, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses payable by the Company in
connection with the sale and distribution of the securities being registered,
other than underwriting discounts and commissions. All of the amounts shown are
estimates, except the Securities and Exchange Commission registration fee.
<TABLE>
<CAPTION>
To Be Paid
By The
Registrant
----------
<S> <C>
Securities and Exchange Commission registration fee............... $ 754
Accounting fees and expenses...................................... 4,000
Printing expenses................................................. 0
Transfer agent and registrar fees and expenses.................... 0
Blue Sky fees and expenses (including legal fees)................. 0
Legal fees and expenses........................................... 4,000
Miscellaneous expenses............................................ 2,000
----------
Total........................................................ $ 10,754
==========
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 204(10) of the California General Corporation Law ("California Law")
permits indemnification of officers, directors, and other corporate agents under
certain circumstances and subject to certain limitations. The Company's Articles
of Incorporation and Bylaws provide that the Company shall indemnify its
directors, officers, or agents to the full extent permitted by California Law.
The right to indemnification conferred to such parties is a contract right.
These indemnification provisions may be sufficiently broad to permit
indemnification of the Registrant's officers and directors for liabilities
(including reimbursement of expenses incurred) arising under the Securities Act
of 1933, as amended (the "Securities Act").
The Company has obtained liability insurance for the benefit of its directors
and officers.
At present, there is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company in which indemnification is
being sought.
II-1
<PAGE>
Item 16. Exhibits
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
- ------- ----------------------
<C> <S>
4.01 Form of Note and Warrant Credit Agreement among the Company and several investors dated June 4,
1999. (incorporated by reference to the Registration Statement on Form S-3 filed September 28, 1999)
4.02 Warrant Agreement between the Company and Imperial Bank dated May 11, 1999. (incorporated by
reference to the Registration Statement on Form S-3 filed September 28, 1999)
5.1 Opinion and Consent of Rosenblum, Parish & Isaacs, P. C.
23.1 Consent of Moss Adams LLP
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Rosenblum, Parish & Isaacs, P. C. (included in Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained in Part II of the Registration Statement
as filed on September 28, 1999).
</TABLE>
Item 17. Undertakings.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
D. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing this Amendment on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Jose, State of California, on the 8th day
of November, 1999.
SILICON VALLEY RESEARCH, INC.
By: /s/ James O. Benouis
-------------------------------------
James O. Benouis
President and Chief Executive Officer
POWER OF ATTORNEY
Each of the officers and directors of Silicon Valley Research, Inc. whose
signature appears below hereby constitutes and appoints Robert R. Anderson and
James O. Benouis and each of them, their true and lawful attorneys and agents,
with full power of substitution, each with power to act alone, to sign and
execute on behalf of the undersigned any amendment or amendments to the
Registration Statement on Form S-3 and to perform any acts necessary in order to
file such amendments, and each of the undersigned does hereby ratify and confirm
all that said attorneys and agents, or their or his substitutes, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on September 28, 1999 by the
following persons in the capacities indicated.
Signature Title
--------- -----
/s/ Robert R. Anderson Chairman of the Board
- -----------------------------------
Robert R. Anderson
/s/ James O. Benouis President and Chief Executive Officer
- ----------------------------------- (Principal Executive Officer) and Director
James O. Benouis
/s/ David G. Arscott Director
- -----------------------------------
David G. Arscott
/s/ David Knight Director
- -----------------------------------
David Knight
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
- ------- ----------------------
<C> <S>
4.01 Form of Note and Warrant Credit Agreement among the Company and several
investors dated June 4, 1999. (incorporated by reference to the
Registration Statement on Form S-3 filed September 28, 1999)
4.02 Warrant Agreement between the Company and Imperial Bank dated May 11,
1999. (incorporated by reference to the Registration Statement on
Form S-3 filed September 28, 1999)
5.1 Opinion and Consent of Rosenblum, Parish & Isaacs, P. C.
23.1 Consent of Moss Adams LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Rosenblum, Parish & Isaacs, P. C. (included in Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained in Part II
of the Registration Statement as filed on September 28, 1999).
</TABLE>
<PAGE>
EXHIBIT 5.1
September 27, 1999
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Silicon Valley Research, Inc. Registration Statement on Form S-3
Ladies and Gentlemen:
As legal counsel to Silicon Valley Research, Inc., a California corporation
(the "Company"), we are rendering this opinion in connection with the
preparation and filing of a registration statement on Form S-3 (the
"Registration Statement") relating to the registration under the Securities Act
of 1933, as amended (the "Act") of 5,527,909 shares (the "Outstanding Shares")
of Common Stock, without par value, of the Company (the "Common Stock") held by
certain selling security holders and 11,629,250 shares (the "Warrant Shares") of
Common Stock issuable by the Company upon the exercise of warrants (the
"Warrants") issued to the selling security holders as set forth in the
Registration Statement to which this opinion is being filed as Exhibit 5.1.
We have examined such instruments, documents and records which we deemed
relevant and necessary for the basis of our opinion hereinafter expressed. In
such examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies.
Based on such examination, we are of the opinion that the Outstanding
Shares are duly authorized, validly issued, fully paid and nonassessable and the
Warrant Shares are duly authorized and, if and when issued upon exercise of the
Warrants in accordance with the respective warrant agreements, will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the above-
referenced Registration Statement and to the use of our name wherever it appears
in said Registration Statement, including the Prospectus constituting a part
thereof, as originally filed or as subsequently amended. This consent is not to
be construed as an admission that we are a person whose consent is required to
be filed with the Registration Statement under the provisions of Section 7 of
the Act.
This opinion is to be used only in connection with the sale of the Shares
while the Registration Statement is in effect, and may not be used for other
purposes.
Respectfully submitted,
/s/ Rosenblum, Parish & Isaacs, P. C.
<PAGE>
EXHIBIT 23.1
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
Silicon Valley Research, Inc. on Form S-3, our report on the consolidated
financial statements of Silicon Valley Research, Inc. and its subsidiaries dated
June 10, 1999, appearing in the Annual Report on Form 10-K of Silicon Valley
Research, Inc. for the year ended March 31, 1999. We also consent to the
reference to our firm under the caption "Experts" in the Prospectus forming part
of such Registration Statement.
/s/ Moss Adams LLP
San Francisco, California
September 27, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated June 12, 1998 relating to the
consolidated financial statements as of March 31, 1998 and for each of the two
years then ended, which appears in Silicon Valley Research, Inc.'s Annual Report
on Form 10-K for the year ended March 31, 1999. We also consent to the
reference to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
San Jose, California
September 27, 1999
